If there is much market demand to buy above a resistance level or sell below the support, the forex broker acting as the market maker has to absorb all the buy/sell orders. However, you must know that the market maker is not a fool. There must be a seller for each buyer and a buyer for each seller.
Most of the retail traders being new or inexperienced individual investor like to trade the breakouts! The new traders learn technical analysis. They tend to most eagerly follow trade recommendations based on certain chart patterns recommended in the technical analysis courses.
Most of the successful traders are contrarian in their trading approach. The seasoned traders do exactly the opposite of what the crowd is expected to do. They prefer to fade breakouts.
Trading is a zero sum game. For every loser, there is a winner. Most of the breakouts fail. Breakouts fail because the institutional or the seasoned traders take advantage of the crowd psychology of the retail or inexperienced traders and win at their expense.
Understand the tricks that can be played by the forex dealers and seasoned traders. Market makers, mostly the forex dealers and brokers can fade breakouts. Their game plan is simple. They will make money from the majority of the crowd. The crowd thinks that prices will rally happily after an upside breakout. Similarly, the crowd thinks that it will decline dangerously after a downside breakout.
Whether you like it or not, market makers have to take the opposite side of your trade. They are the pricing counterparties to the retail traders like you and me. Suppose most of the retail traders have placed their stop entry orders at a certain price above the resistance level anticipating a breakout.
Market makers spend some of their money to bid up the price to that level where most of the stop entry levels have been placed. Market makers reach into their pockets. Now they can sell to most of the traders who are desperate to buy. They make some decent profits from this trick that they had played on inexperienced traders.
By selling to the retail crowd, market makers get the chance to close their long positions. Now they begin to overwhelm the buying crowd by going short. This pushes the prices down, below the breakout level. Many stop loss orders have been placed by the retail traders who wanted to trade the upside breakout at this price level.
Market makers have the information of their customer’s orders from their order book. Thus a potential conflict of interest exists. By buying from the retail traders who are selling to close their losing breakout trades, market makers happily offload their short positions now. Retail traders must know how to protect themselves.
Retail crowd thinks that the false breakout is due to the sudden turning of the market. Market makers often go on the stop hunting spree. False breakouts maybe the consequence of that! These false breakouts are most likely the direct result of the games market makers play.
Wednesday, July 15, 2009
False Breakout
However, you should not misunderstand every false breakout as the result of the tricks big players play. False breakouts can be as a result of price action losing momentum soon after a breakout. Market running out of steam to reach higher highs and lower lows in a sustained price break may also give you a false breakout.When there are not enough sellers in the market to sustain a downward price move or enough buyers in the market to sustain an upward price move, the breakout will fade out soon and may not be sustainable. Individual traders have higher chances of success if they also fade the breakout just like the big players who love to fade breakouts.Profits potential in price breakout is far higher than in a failed breakout. Everyone wants big easy profits. Fading breakouts is counterintuitive and it is not something instinctive. The question is how to identify a false breakout.Look for fading breakout opportunities on a minimum time frame of hourly charts or more. Fading breakouts can occur anywhere on the price charts at the levels of support and resistance.You need to know how to draw trendlines. Trendlines are drawn by joining at least two extreme points of highs or lows over a long period of time. They can be horizontal or sloping. The price will bounce off the trendline in a false breakout and the probability of a false breakout is higher if the trendline is at an angle or a gradient. The chances of this fading breakout are more if the moving average lies slightly above the descending trendline or slightly below the ascending trendline. Usually the third or sometimes even fourth extreme point of contact on a gently sloping trendline presents a good fading opportunity.The chances of a false breakout or a trendline bounce will be much higher if the prices are approaching the trendline slowly and gently. The speed of price movement before the approach to the trendline should be considered. It is very important in identifying a fading breakout.There will be a sustained follow through in prices if the price action has a high momentum. The fast and high amplitude approach of price action will most likely result in a successful price breakout of the trendline on the other hand. In such a case, don’t trade it as a likely false breakout. You should place a limit or market entry order a few pips above an up trendline or below a down trendline. You will want to know how to trade a fading breakout? You can stagger your entry orders by placing another order a few pips away from the breakout if you are an aggressive trader.Now there are a few chart patterns that are ideal for identifying the false breakouts. About placing staggered entry orders for fading breakouts, you should do it with a proper money management plan. Stops should be placed at least 20-30 pips beyond the support or resistance, away from the price zone. This will make your average cost of entry more favorable for either your long position or your short position.
You need to know technical analysis if you want to trade forex successfully. There are some chart patterns where the false breakouts are more likely to occur. You need to apply a lot of common sense in identifying a false breakout. You should be able to identify likely false breakouts in order to employ the breakout fading strategy.Head and Shoulders Pattern: The pattern resembles the head and shoulder pattern of a human. This chart pattern is the hardest for new traders to identify. Don’t confuse it with a shampoo. The head and shoulder pattern consists of three points of rallies. The middle rally is the highest with the left and right being smaller. A horizontal or sloping neckline can be drawn connecting the lows of the left and right shoulders. It signals a bearish reversal or a consolidation period before the uptrend is continued if the head and shoulder pattern is found at the end of an uptrend. An inverted head and shoulder pattern can also be found in the middle or end of a downtrend. The head and shoulder pattern is usually found in the middle or end of an uptrend.If they are buying up the rallies from the support level, many traders who have identified the head and shoulder pattern as a possible breakout signal place their stop loss orders below the neckline. Head and shoulder patterns are notorious for precipitating a false breakout.Similarly, if traders are shorting the decline from the resistance level, they place their stop loss orders above the neckline of the inverted head and shoulder pattern. Traders can also place numerous entry stop orders below the neckline. Traders can also place entry stop orders above the inverse neckline in anticipation of a breakout besides the stop loss orders.False breakouts are triggered by the market makers to shake out the positions of small traders most of the time. Prices will usually rebound. There maybe explosive price movements off the neckline in the pre breakout zone.You may choose to place a stop loss slightly below the high of the second shoulder or slightly above the low of the second shoulder. You may fade the breakout with a limit of market entry order a few pips above the neckline or a few pips below the inverse neckline. It is always best to assume that the first break of a head and shoulder pattern will tend to be false.
You need to know technical analysis if you want to trade forex successfully. There are some chart patterns where the false breakouts are more likely to occur. You need to apply a lot of common sense in identifying a false breakout. You should be able to identify likely false breakouts in order to employ the breakout fading strategy.Head and Shoulders Pattern: The pattern resembles the head and shoulder pattern of a human. This chart pattern is the hardest for new traders to identify. Don’t confuse it with a shampoo. The head and shoulder pattern consists of three points of rallies. The middle rally is the highest with the left and right being smaller. A horizontal or sloping neckline can be drawn connecting the lows of the left and right shoulders. It signals a bearish reversal or a consolidation period before the uptrend is continued if the head and shoulder pattern is found at the end of an uptrend. An inverted head and shoulder pattern can also be found in the middle or end of a downtrend. The head and shoulder pattern is usually found in the middle or end of an uptrend.If they are buying up the rallies from the support level, many traders who have identified the head and shoulder pattern as a possible breakout signal place their stop loss orders below the neckline. Head and shoulder patterns are notorious for precipitating a false breakout.Similarly, if traders are shorting the decline from the resistance level, they place their stop loss orders above the neckline of the inverted head and shoulder pattern. Traders can also place numerous entry stop orders below the neckline. Traders can also place entry stop orders above the inverse neckline in anticipation of a breakout besides the stop loss orders.False breakouts are triggered by the market makers to shake out the positions of small traders most of the time. Prices will usually rebound. There maybe explosive price movements off the neckline in the pre breakout zone.You may choose to place a stop loss slightly below the high of the second shoulder or slightly above the low of the second shoulder. You may fade the breakout with a limit of market entry order a few pips above the neckline or a few pips below the inverse neckline. It is always best to assume that the first break of a head and shoulder pattern will tend to be false.
Market Orders
Forex markets are open 24 hours a day, five days a week except on weekends. You cannot sit in front of your computer screen all the day watching the markets move. Currency traders use market orders to catch market movements when they are not in front of their screens. A market move is just likely to happen while you are asleep or in the shower as while you are sitting in front of your computer screen.There are many types of market orders. Proper use of market orders is very critical to your trading success. You should think of the different types of market orders as trades waiting to happen. You are in the market so be as careful as possible while playing with the market orders if you enter an order and the subsequent price action triggers its execution. Trading can be very difficult without these market orders.Professional currency traders routinely use market orders to limit risk in volatile or uncertain markets, implement a trade strategy from entry to exit, capture sharp short term price fluctuations and preserve trading capital from unwanted loss. Market orders are essential for maintaining trading discipline and your peace of mind as a trader.
Currency markets can be notoriously volatile and difficult to predict. There can be sudden price swings. Using market orders can help you capitalize on short term price movements while limiting the impact of any adverse price movements. You probably don’t have a well thought out trading plan if you don’t use market orders. It will also give you the peace of mind in trading. There is no guarantee that the use of market orders will limit your losses and protect your profits in all market conditions. However, a disciplined use of market orders will help you quantify the risk that you are taking. A number of different types of market orders are available to currency traders in forex markets. You should add the market orders to the list of questions you need to ask the broker when you open an account with a forex broker because you should know that not all market orders are available at all online forex brokers.Take Profit Orders: Use the take profit order to lock in profits when you have an open position in the market. An old market saying, “You can’t go broke taking profits.” If you are long EUR/USD at 1.2845, your take profit order will be to sell the position somewhere higher close to 1.2875. Suppose you are short GBP/USD at 1.2354. Your take profit order will be to buy back the position and be place somewhere below 1.2334. Making you a profit of 20 pips!Limit Orders: Don’t forget the saying, “Buy low and sell high”. A limit order is any market order that triggers a trade at more favorable levels than the current market price. The limit order must be placed somewhere above the current market price if the limit order is to sell. The limit order must be entered somewhere below the current market price if the order is to sell.
Currency markets can be notoriously volatile and difficult to predict. There can be sudden price swings. Using market orders can help you capitalize on short term price movements while limiting the impact of any adverse price movements. You probably don’t have a well thought out trading plan if you don’t use market orders. It will also give you the peace of mind in trading. There is no guarantee that the use of market orders will limit your losses and protect your profits in all market conditions. However, a disciplined use of market orders will help you quantify the risk that you are taking. A number of different types of market orders are available to currency traders in forex markets. You should add the market orders to the list of questions you need to ask the broker when you open an account with a forex broker because you should know that not all market orders are available at all online forex brokers.Take Profit Orders: Use the take profit order to lock in profits when you have an open position in the market. An old market saying, “You can’t go broke taking profits.” If you are long EUR/USD at 1.2845, your take profit order will be to sell the position somewhere higher close to 1.2875. Suppose you are short GBP/USD at 1.2354. Your take profit order will be to buy back the position and be place somewhere below 1.2334. Making you a profit of 20 pips!Limit Orders: Don’t forget the saying, “Buy low and sell high”. A limit order is any market order that triggers a trade at more favorable levels than the current market price. The limit order must be placed somewhere above the current market price if the limit order is to sell. The limit order must be entered somewhere below the current market price if the order is to sell.
Invest In Gold
The importance of gold in terms of wealth cannot be undermined. Gold is unarguably one of the most precious elements on the earth. However, the sources are limited. Gold is becoming rarer with each passing day and hence, the price of gold is continuing to rise higher and higher.Invest in Gold Therefore, it is a perfect alternative to trade gold. It is thus advisable that you buy gold when the price decreases in the market. Later on, when there is a rise in the price, you may sell gold in the market. Before you start to invest in gold, it is best to have a perfect strategy for investing in gold. You also have to be familiar with the market that deals in bullion to get the maximum benefits.Invest in Gold Next, investing in gold bullion bars of different sizes and weights like ounces, grams and kilograms is also a better option. To buy gold bullion of 10-ounce bar, which consist of a fine purity of 99.5% is the standard unit and may be the best vital alternative not only in gold trading, but also for personal use.There are many advantages of bullion gold. It is similar to stocks and can be traded at the latest market rates. Gold bullion is not only considered a tangible asset, but also an investment that ensures total security and value during the time of financial inflations or crisis.Invest in Gold Due to the multiple benefits, majority of investors think that it is better to invest in gold certificates. You can trade gold freely in the gold market by investing in gold certificates or funds. Gold funds and certificates are completely insuredFor investing in gold, bullion coins surely proves to be one of the best options. By selling gold bullion, you may earn cash in times of emergencies or urgency, while saving the others. By doing this, you will save some extra expenses. As these coins come in small sizes, there is no need of cutting them in more small pieces.
Trading Secrets
Trading is speculating. It is not investing. It is not the buy and hold strategy that was taught to you. Trading can be challenging. Trading is a risky business and requires active participation. Speculation is done in the hope of profiting from market fluctuations by taking a business risk. It also requires putting your money on the side of the trade on which you think the market is going to go up or down. Successful speculation requires predicting outcomes and analyzing different market situations.Trading Secrets If you are a trader, you should appreciate the fact that if you apply the correct techniques for analyzing trades, manage your money and protect your trading account, you can be wrong 70 percent of the time and still be a successful trader. How is that possible? It is only possible by entering a trade where the risk/reward ratio is less than 1/3.Right now forex and gold markets are really hot while the stock market is down. Stock market was a great investment opportunity a few years back. Over time, opportunity keeps on shifting from one market to another. Gold prices are going up. Those investors who entered this trend in the gold market by investing at the right time if they are going to ride the trend till it lasts in the gold market will make a lot of money. At the moment almost everyone is investing in gold as a hedge against likely USD depreciation. Everyone includes countries like China, Russia, India, hedge funds, institutional investors like big corporation and big banks, and retail investors. Trading Secrets Last year in 2008, oil prices had reached almost $140 per barrel in a matter of few months. Many hedge funds had made a lot of money by investing in crude oil futures in the year 2008. Then the bubble burst and oil prices came tumbling down to almost close to $35 per barrel. This situation may continue for some months or some years but suddenly you will find that crude oil futures have become a great investment opportunity again. Right now oil prices are down due to the reduced demand in the global markets.Timing for entering the market and the timing for exiting the market is very important for a successful trade. In trading it is the timing that is of essence. As the global economy recovers and demand for oil increases, oil prices will again go up in a few years time.Trading Secrets Investors and traders make the mistake of focusing only on one market. Many end up spending time on only one market. In reality all the markets are interlinked. Futures, options, forex, stocks, commodities, all markets are effected and in return effect other markets. If something happens in one market, you will find the repercussions in the other markets. Successful trading requires mastering a strategy that enables you to trade multiple markets and multiple time frames.Many traders get stuck up with one market. They want to master that market. They trade only one instrument. They do testing and development. They put on a million indicators. Then they go and trade live that instrument. While they do everything they can while spending all kinds of time trying to figure out one market and one timeframe. But then what almost happens is that the market starts to go sideways. The opportunity shifts to another market.
Rollovers in Forex
Rollovers represent the intersection of interest rate markets and forex markets.When an open position from one value date or settlement date is rolled over to the next value date or settlement date, this is known as a Rollover in forex trading. Rollovers are unique to the forex markets.Keep this in mind what you are trading is in fact the good old cash. Currency is money after all. So when you talk of money, interest rates naturally come into play. Rollover rates depend on the difference between the interest rates of the two currencies in the pair that you are trading.You should expect an interest gain/expense on holding a currency position over time. It is similar to earning interest on a bank deposit and paying interest on a loan. It is like having a deposit in a bank account when you are long on a currency. It’s like take a loan from the bank if you are short.Interest rate differential is the difference between the interest rates between the two currencies. You should think of the open currency position as one currency with the positive balance (the currency you are long) and one with negative balance (the currency you are short).You should look for the base or benchmark lending rates in each country. The interest rates of two different countries apply because your accounts are in two different currencies. You can find the benchmark lending interest rates of different countries from any good financial website like the Wall Street Journal, the Financial Times, CNBC etc.If you hold an open position past the settlement date or value date, rollovers are usually carried out by your forex broker. The smaller the impact of the rollovers, the narrower the interest rate differential! The larger the impact from rollovers, the larger the interest rate differential!Some online forex brokers apply the rollover rates by applying the rollover credit or debit directly to your margin balance. Other forex brokers apply the rollover rates by adjusting the average rate of your open position. Rollovers are applied to your open currency position by two offsetting trades that result in the same open position.Day traders don’t have to worry about rollovers. Rollovers do not apply for day traders who usually close their positions at the end of each trading day. Rollovers are not applied if you don’t carry a position over the change in the value date. Rollovers only apply to your over night open position carried over to the next day. Rollovers are applied to open position after 5.00 PM EST change in value date.If you are short the currency with the higher interest rate and long the currency with the low interest rates, rollovers will cost you money. If you are long the currency with the higher interest rate and short the currency with the lower interest rate, rollover can earn you interest income.
FAPT Evolution
If you saw the Fapt Evolution proofpage yesterday, I am sure a ton of questions kept running through your mind. How can a forex robot has such an extreme performance? What are the differences between all those crappy metatrader 4 robots and this new java based platform one? Why are spreads so much better here? and most important: How the hell does this robot manage to pull in USD 8,400 in REAL CASH in a SINGLE DAY of autotrading?FAPT EvolutionWell the good news is they promised to answer all of those questions plus give out a FREE copy of Fapt Evolution robot to a lucky winner! How? Simple. Just attend one of the two free webinars that are being held tomorrow! 1 winner per webinar will be chosen randomly among the participants, so make sure to be there early before the rooms are full! Time's running out - the long awaited Fapt Evolution webinar's going to take place very soon.People have so many questions... they want to know so much and this is the chance to get those important questions answered by the Fapt development team themselves. I love it when product vendors are accountable for what they sell... that they back up their product and efforts... that they don't hide behind some hyped up sales page...FAPT EvolutionWhen it comes to accountability and transparency, the Fapt team is #1 - HANDS DOWN! Make sure you join their webinar - places are restricted and I expect them all to be full within a few minutes of the start, so go here now:2 Copies Are Being Given Away At N0 Cost The Fapt team is giving away 2 copies of Fapt Evolution during the special webinar they're conducting. This is your chance not just to participate in one of the more important forex events of the year but also to win one of those copies of the most sought-after Forex robot in the world!Remember that only 2,000 copies will ever be released so it wouldn't be a bad idea to try and get one of the complimentary licenses - there's a fairly high probability that the 2,000 copies will be sold before you have a chance to get yours. Participate in the webinar - ask what you need to ask... grill the Fapt team a bit... and, of course, try to get your hands on one of those Fapt Evolution copies here:FAPT EvolutionOhhh - before I forget...We hope you saw the amazing earnings shown on the FAPT Evolution proof page yesterday...The website has received a record number of hits! The buzz revolving around FAPT Evolution is out of control! Some of the biggest names in the forex industry have beta tested this software and are verifying the unbelievable earnings claims FAPT Evolution has been making. Again these are all listed on the proof page:FAPT EvolutionSo you might be asking...how do I get my hands on something this great 100% Free??...Well the creators have decided to give away a couple free copies of Fapt Evolution in tomorrows webinars for those serious about making (more than) a full time income online while chilling on the couch. The winner will be chosen randomly at the end of each webinar so make sure to attend.Forex is a continuous learning process and these guys wants you to gain priceless information while also having a shot at a copy of this limited super robot! Both seminars will be held tomorrow, Monday 13th, seats are limited so make sure to attend early. There are 2 webinars tomorrow. One is at 4 PM EST and the other is at 7 PM EST. You can register for these webinars toward the bottom of the proof page...FAPT EvolutionNot only will you get some great Forex Insider secrets from these masters...you might walk away with FAPT Evolution Free. The response regarding the account proofs on the Evolution website has been phenomenal! People are emailing me raving about how profitably this robot has been performing and simply asking me when and where they can get it. I hope you got the chance to see how well those accounts have been performing and understood why there is so much excitiment right now from 10's of thousands of people! You can always access them here:This is what Steve, Mike and Uli, Marcus B. Leary, Andreas Kirchberger, the whole of Forex Guru Club and the FAPT Team say about FAPT Evolution: "Fapturbo "Evolution" is about to be released. FAPT Evolution is the most powerful and stable Forex Robot we have ever developed. Some of our beta testers literally suggested we not sell FAPT Evolution to the masses, but rather limit sales so as to not dilute FAPT Evolution and its money making capabilities. We decided to appease them as a form of compromise of sorts by limiting copies sold (unlike the original fapturbo).FAPT EvolutionDevelopment of this new super robot has been in the works for over 8 months and we are EXTREMELY proud of it.. This is a first in the industry.The first of its kind, to bring together an automated forex trading solution encompassing both the perfect broker and the perfect artifical moneymaker. A robot which abandoned the metatrader4 programming language in favor of something RADICALLY more powerful for a platform with very stable spreads.Second, because the forex market is so huge, selling LIMITED copies will supply us with real live trading info and data... allowing us to perfect and tweak. If you are one of the lucky few traders to get FAPT Evolution we urge you to post your results in the FAPT Evolution Forum enabling us to analyze your personal results so we may hone our skills and keep rocking.We really feel as though it's PERFECT as it is but hey we digress.
Forex Demo Account
Almost every broker offers a free forex demo account to new clients. This is used as a marketing gimmick by most of the brokers in order to entice new people to forex trading. All you need to do is to sign up with any good forex broker. The best way for new traders to get a handle on what currency trading is all about is to open a demo account.Forex demo account gives you the great chance to experience the forex market without losing your real money. You can see how the price changes at different times of the day. Demo accounts are funded with virtual money. So you are able to make trades with no real money at stake and gain experience in how margin trading works. The more you use the practice account, the more familiar you will become with how the forex market works. This will help build your confidence. Confidence is what you need when trading live. Without any fear of losing money, you can trade your demo account with real market conditions. Practice trading will teach you how various currency pairs may differ from each other? It will also teach you how the forex market reacts to new information when major news and economic data is released.You will also learn using different market orders on your demo account. Imagine using your real money trying to figure out how different market orders work. You will learn on your demo account how to manage an open position? This will improve your understanding of how margin trading and leverage works. You can also start analyzing charts and following technical indicators on your practice account. Without any fear of losing your money, you can experiment with different trading strategies and see how they work out in the real market conditions.You can test drive almost all the features and functionality of a broker’s platform on your demo account. However, one thing you will never be able to simulate on your practice account is the emotions involved in trading. Controlling emotions is important in order to become a successful trader. Emotions will only come into play once you put your real money on the line. Demo accounts are a great way to experience real forex markets first hand.You can use market orders like the limit orders or the one cancels the other orders. However, you can also trade the current price of the market using the click and deal feature of your broker’s platform. There are many ways to pull the trigger in the forex market. Pulling the trigger means how to enter or exit a position.Many traders don’t want to leave an order that may or may not get executed. Most like the idea of opening a position by trading at the market. Most prefer the certainty of knowing that they are in the market.You just need to specify the amount that you want to trade. Then click on the buy or sell button to execute the trade. The forex trading platform will respond back within a second or two with a pop-up message either confirming or not confirming that the position was opened. Most forex brokers provide live streaming prices. You can deal with these live price feeds with a simple click of your computer mouse.You should understand and know from the get go that any action you take on a trading platform is basically your own responsibility. You cannot blame anyone except yourself. You may have meant to click Sell but instead you clicked Buy. No one knows for sure except you. Forex demo account is the ideal place to learn forex trading and avoid these costly mistakes.If you don’t want to blow your account repeatedly, double your demo accounts three times in a row only then trade live. First practice on your demo account instead of jumping into live trading!You should know that when the prices are adjusting quickly like break of a key technical level or price point or after a data release, attempts to trade at the market can sometimes fail in very fast moving markets. You must understand that part of this stems from the latency effect or time lags on the internet. You can experience these time lags so that you don’t learn them during real trading by first practicing on your demo account. The time lag between the platform reaching your computer and your trade request reaching the platform server can cause your trade to fail in fast moving markets.You are in the market by pulling the trigger. You opened your position. The forex market isn’t a roulette wheel where you place your bets, watch the wheel spin and simply take the result. Don’t think that you have pulled the trigger and now its time to sit back and let the market do its thing. You will have to constantly monitor your trade position on regular basis.Always trade with a plan! New information and price developments are constantly creating new opportunities and changing previous expectations. Currency market is a dynamic and fluid environment. You should know how to exploit these newly created opportunities by changing your trading plan.Before getting caught up in the emotions and noise of the market, you can improve your chances of trading success by thoroughly planning each trade. You should know in advance where to enter and when to exit a trade. Entry and exit at the proper time is crucial for making a winning trade. If you are following a medium to long term trading strategy based on swing trading the currency markets, you will generally set wider stop loss and take profit targets and adopt the policy of set and forget. How much managing your open position you need, it depends on your trading style and the overall market conditions.No matter what your trading style, it pays to keep up with the market news and price developments while trade is active. Even for a longer term trade, staying on top of the market is still a good idea. A lot can happen between you open a position and the price action hitting your target level. So you may require making changes to your trading plan. Unexpected news may suddenly impact your position.When we talk of making changes to the trading plan, we are referring only to reducing the overall risk of trading by moving the take profit or stop loss order. Your account will be blown up in a matter of hours or days if you don’t know these things. You need to learn and experience these things on your demo account first. Don’t try to learn them on your real account.
The US Dollar Index
The US Dollar Index Futures Contracts are traded on the New York Board of Trade at Finex and at the Chicago Mercantile Exchange (CME). The US Dollar Index is widely quoted in the press and on quote services and is used by traders to get the big picture of the overall trend of the dollar. The Federal Reserve Board had introduced the US Dollar Index in 2003. The index is the result of the Smithsonian Agreement that had replaced the Bretton Woods Agreement. The US Dollar Index is similar to the Fed’s Dollar Index which is a trade weighted index. The Fed gives value to each individual currency in the index based on how much it trades with the US.However, the US Dollar Index and the Fed’s Dollar Index should not be confused with one another. The value of US Dollar Index and the Fed’s Dollar Index is different. The US Dollar Index futures contract expires on March, June, September and December. The minimum tick on the US Dollar Index is 0.1. One tick is equals $10.Delivery is physical and means that you receive dollars based on the value of the index. Delivery is made on the second business day during the month of the expiring contract prior to the third Wednesday. The overall value of the futures contract on the index is 1,000 times the value of the index in dollars. Suppose the value of the index is 80. It’s value in dollars will be $ 8,000.No trading limits are placed on the US Dollar Index. Trading hours are from 8.05 AM to 3:00 PM. There is overnight trading also from 7 PM to 10 PM. Delivery day of the US Dollar Index Futures Contract is the third Wednesday of the contract month. The US Dollar Index was modified at the inception of the Euro. It is weighted in a way that’s similar to the Fed’s trade weighted index as follows: Highest percentage is for Euro 57.6%, second highest is Japanese Yen 13.6%, third highest is Great Britain Pound 11.9%, then comes Canadian Dollar 9.1%, Swedish Krona 4.2% and Swiss Franc 3.6%. The US Dollar Index is best used as an indicator of trends in the forex market.However, you must keep this in your mind that as compared to trading currencies, the US Dollar Index is not a good trading vehicle. The best way to trade the index is by using the currency mutual funds. There are a few good currency mutual funds that you can find. You should know that one of the secrets of knowing trading success is understanding what kind of personality you have. You should know whether you are weak nerved or strong nerved.If you are weak nerved than spot forex market is not for you! Suppose you fear that the market will move against you. You are afraid of taking a bathroom break or even a coffee for that matter. You can’t even blink your eye afraid that you will end up with a margin call. In such a case you need to invest in currency mutual funds based on US Dollar Index and relax. You can avoid a big part of the risk involved in trading spot currency market by trading currency mutual funds. You can have a pretty good idea as to how your fund is going to close at the end of the day if you check the dollar index a few times during the day. This will smooth your nerves and make you relax. If trading makes you tense and nervous, you should think about doing something else. Maybe trading is not for you.
FAPTurbo Evolution
Fapturbo Evolution has gone gold. A few days ago I already mentioned about the Fapturbo Evolution from the same team that developed the world renown The Fapturbo robot...The Fapturbo Evolution just pushes forex trading to the next level and it just went live today:FAPTurbo EvolutionCheck out the proofs about the robot that manages USD 117,369 Real Money Account...the first robot in the world that has 100% successful rate... Depending on what time you read this it may already be too late. The FAPTurbo Evolution Edition trading robot has been unleashed on the Forex world today and as you read this post, I can tell you that there are already thousands of other traders scrambling to the website to get a copy. I know that you do not want to be left behind and the doors are officially opened now so head on over to the following link to get your copy:FAPTurbo EvolutionIf you're still on the fence about whether to get it or not, let me give you the low down on this digital monster. Here's what we know about the FAPTurbo Evolution Edition trading robot so far:* This is the only Forex robot in existence that is able to double real money deposits every month since the year 1999.* The trading robot was beta tested on live accounts and the live statements can be seen on the site. (The latest results of yesterdays trades are there as well)* There is a members zone built to make it as easy as possible for you to get up and running.* There are Phone support lines ready to answer even the most basic questions.* The robot was specifically designed to work with only one broker.* Dukascopy only deals with the larger clients and their dealing desk has been designed for high performance, lightning fast execution. Only banks get this level of service.* Additional tweaking and optimization was performed on the robot to ensure maximum quality.* The robot trades 3 currency pairs.* No more Metatrader lags and execution delays.* True Interbank environment - no dealing desk tricks and spread-price manipulation.* There is an automated installer and easy to follow guide included.* You also get video tutorials and a how to install step by step guide.
Breakout Trading
When the currency price moves beyond the period of consolidation or range trading, a breakout typically occurs. Massive profits are what breakout trading can provide you. Who doesn’t want to reap massive profits from a big price move in a short time?Even though breakouts are known to be technically unstable, there are times when trading the breakout can be very profitable. When the price moves above or below a support or resistance level whether temporarily or permanently, a breakout occurs.You will have to take into account many market factors including both the technical and the fundamental analysis in order to trade breakouts with a higher probability of success. Both stocks and futures are traded on a centralized exchange. At the end of the day the traders can find out the volume of each security that had been traded during the day. The volume information is easily available for stocks and futures. Information about volume is critical to trading the breakout. This data cannot be collected due to the decentralized nature of the currency markets. Volume data is not available for currency markets due to its Over the Counter nature. Lack of forex volume data is a huge disadvantage to forex traders. Volume reveals where the market is positioned or positioning.Breakout signals a change in the underlying supply and demand conditions possibly triggered by a change in market sentiments. When the price attempts a breakout of a significant support or resistance level, this change is caused by some new markets fundamentals. Successful breakouts are generally accompanied by a rise in volume. Volume is a very important criterion for any breakout trading strategy.Price breakouts can be of two types: 1) Continuation Breakouts and 2) Reversal Breakouts. Successful breakouts must be accompanied with a strong surge of momentum in the direction of the breakout in order to be sustainable. Poor momentum will generally lead to the fizzling out of the breakout and continuation of the existing trend.Continuation Breakout: The price action climbs higher in continuation of an uptrend or falls further lower in a downtrend in a continuation breakout. The breakout occurs after a period of consolidation. The buyers and sellers of the currency pair try to regroup and think about the next price move. Currency prices break out of an established price level to again resume the underlying trend.Reversal Breakout: A breakout my lead to a trend reversal and the beginning of a new trend in the opposite direction! Reversal breakout means a new trend in the opposite direction caused by new market fundamentals. The prices may break the support or resistance but then retreat back into the previous price zone. A false breakout can always occur. There are many times when the price action does not move in a straightforward direction in the markets.If you are a breakout trader and you have placed your stop just above or below the resistance or support levels, a false breakout will stop out most of the breakout traders! The worst kind of a breakout is the whipsaw type.When prices move out of a price range, then back into the price range and then breaks out of the level again, stopping both breakout traders and faders at least once, whipsaw takes place. When there is a lack of momentum or the breakout is small and weak, a whipsaw breakout usually occurs.Reasonably placed stops can help preserve your capital when the price breakout does not go your way. Some times the price action is so choppy that it is better to stay out of the market. Breakouts all carry some risk of failure.Successful trading of a reversal breakout obviously means massive profits in the shortest possible time. The important thing is to identify a breakout with a false breakout. How do you know if a breakout is going to reverse the current trend?There are some chart patterns that can help in identifying a likely breakout. You should look out for these reversal chart patterns that tend to serve as harbingers of a trend change. There is a high chance that a reversal may be in the works if you spot these chart formations in daily or weekly charts. Examples of such patterns include head & shoulder, double top, triple top, double bottom, triple bottom etc.Momentum indicators also known as oscillators are leading indicators. You can also make use of the momentum indicators to tell you if a trend is nearing its end in addition to looking for these chart patterns. They help in identifying a trend reversal before time.MACD comprises of 3 Exponential Moving Averages (EMA). The MACD line is the difference between the 12 period Exponential Moving Average and 26 periods Exponential Moving Average. Usually a signal line consisting of 9 periods Exponential Moving Average is plotted together with the MACD line. Moving Average Convergence Divergence (MACD) is one of the simplest, yet most dependable indicators for a trader
Forex Slippage
You should know the problem of slippage and how to avoid it if you want to successfully trade the news. Slippage occurs when the price you intend to enter or exit the market is different from your actual transacted price. Currency prices tend to move very fast during highly volatile market conditions. The risk of slippage is usually very high when trading the news.Placing stop loss or market entry orders under fast moving market conditions do not guarantee anything. These orders do get filled but mostly at different prices than you had intended. Slippage is the biggest problem when the market moves fast. There is no way you can avoid it. Some of it is genuine. During times when too many orders are placed by the traders, most forex brokers cannot offset these orders in the interbank market due to the small amounts involved. They have to take the opposite positions themselves. This gives them the chance to take the excuse of slippage.Most of the brokers had taken the opposite position themselves as the fast moving market did not allow them to offset these orders in the interbank market. As the broker has the opposite position, if you lose, the broker wins and makes profit. The broker is in fact trading against you now. Many forex brokers will wait till after the big market move is over. Then they will fill your entry order. Sometimes, these entry orders may even get filled past your stop loss or profit target. This means that you would be left with immediate net loss.Slippage is a trick that many forex brokers use in order to make profit by filling your position with a negative spread. Before filling your entry order with wide slippage, many brokers will fill your stop loss or take profit order. The wider the slippage, the fatter the profits the broker is going to make. Imagine the number of orders placed with each forex broker and the amount of profits the broker makes from one such single event. Let’s make it clear with an example. Imagine your profit limit for the EUR/USD is 1.2594. Your long entry stop for EUR/USD at 1.2564! The forex broker may first fill your take profit at 1.2594 and then fill your long entry stop at 1.2604 with a 40 pips slippage. You were confident that you would make a winning trade. If the orders had been filled at the prices you wanted, your trade would have resulted in a profit. But now you have a net realized loss. If the trade goes against you, the forex broker may fill your stop loss order first and then fill your entry order with slippage after that so as to widen their profits. With slippage you cannot predict anything what the broker will do with you.Now imagine you had placed your stop loss at 1.2544 and your long entry stop at 1.2564. Your forex broker could first fill your stop loss at 1.2544 and then fill your long entry stop at 1.2594 with a slippage of 30 pips. You now have a net loss of 50 pips due to slippage instead of planned 20 pips loss. You could never imagine that you would end up with a loss of 50 pips.You should know as an individual trader that your orders will be kept pending till you get stopped out or your profit limit is reached during the release of news when the market moves fast. The more you stand to lose and the more the forex broker stands to make a profit, the larger the slippage you experience. Some forex brokers add slippage to any of your orders to increase their profits during times of fast moving markets when the volatility is high.Many forex traders readily accept the risk of slippage. Most news traders consider slippage as one of the realities of trading the news. However, you as a forex trader should know that slippage can eat up a huge chunk of your profits. In the end slippage can affect your overall profit and loss. In order to avoid slippage, stay out when the market is moving fast. In my next post, I will give you a method that you can use to overcome slippage if you still want to trade the news.
Forex Trading System
Want a good Forex Trading System? Searching for a good forex trading system? If you're anything like me, you've been probably exposed to a number of Forex trading systems haven't you? Most of those trading systems are 100% mechanical in their nature. You know the drill: "if A and B happen, do C... if not, do D instead". They basically tell you exactly what to do and when to do it, which is all good but... the problem is that you do not know what you are actually basing your trading decisions on! Pulling the trigger without know the "why?" factor always gets me a bit nervous. Here's the good news though: You can now learn Forex as a trader instead as a system-follower!Forex Trading System
Luckily for all of us who enjoy old-school trading, there's a fantastic learning program now available where everything related to Forex trader is taught: chart-reading, trend analyzing, stop loss placement, profit takings, news announcements, trading psychology... absolutely everything!!! And you know what's best? it's all taught over live videos! cool ey? If you want to actually learn how to trade Forex, trust me on this one: you don't want to miss this out!Let's see a small snippet of the type of learning you will get in forex trading:Forex Trading System Many folks have asked repeatedly the following particular question regarding Money Management: "If I spot a crystal-clear, mint-perfect, extraordinarily high-probability setup... is it OK to increase my usual lot size for that very trade?" I remember one guy who had even developed a rather unique Money Management system under which he'd rank his trade setups from 1 to 5 points: 1 being a low quality setup with a high degree of risk, and 5 being an A-setup with absolutely all the ducks falling in line.
Luckily for all of us who enjoy old-school trading, there's a fantastic learning program now available where everything related to Forex trader is taught: chart-reading, trend analyzing, stop loss placement, profit takings, news announcements, trading psychology... absolutely everything!!! And you know what's best? it's all taught over live videos! cool ey? If you want to actually learn how to trade Forex, trust me on this one: you don't want to miss this out!Let's see a small snippet of the type of learning you will get in forex trading:Forex Trading System Many folks have asked repeatedly the following particular question regarding Money Management: "If I spot a crystal-clear, mint-perfect, extraordinarily high-probability setup... is it OK to increase my usual lot size for that very trade?" I remember one guy who had even developed a rather unique Money Management system under which he'd rank his trade setups from 1 to 5 points: 1 being a low quality setup with a high degree of risk, and 5 being an A-setup with absolutely all the ducks falling in line.
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